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It's bad enough that this idiot's reasoning is stupid, but the drubbing he takes in the COMMENTS is priceless. Enjoy...
Stocks Are Cheap! Bull Sees Dow 10,000 By Year-End
Posted Jul 22, 2009 12:00pm EDT by Peter Gorenstein in Investing Related: ^dji, ^GSPC, qqqq, kre, xlf, skf
Stocks are cheap -- very cheap, says Brian Wesbury, chief economist with First Trust Advisors. In fact, Wesbury says the market is trading at a 50% discount to fair market value, even after the significant rally off the March lows, which he claims was triggered by the easing of mark-to-market standards.
"Once they changed that rule all of a sudden the banks were able to raise capital [and] credit spreads started to come in. And that's where the rally has come from," he says.
But why does he think stocks are so undervalued?
As he writes in his latest Forbes commentary: "To determine fair value for the stock market we use historical norms for the relationship between stock prices, interest rates and corporate profits. These norms suggest that with interest rates at current levels and corporate profits where they were in the first quarter of 2009, stocks today are at no more than 50% of fair value. Yes, that's right, stocks would have to roughly double from here to get to fair value.
Despite this belief, he's not expecting to reach 'fair value' in the near future. The stock market, he says, "will remain undervalued at least for the next couple of years unless it has a monster rally."
In the meantime, which stocks are most undervalued?
Wesbury won't make specific stock picks but according to his firm's analysis, technology, and small and mid-cap regional banks offer the best value.
115 Comments
Showing comments 1 - 20 of 115Next
Devin J - Wednesday July 22, 2009 12:04PM EDT
This is the same guy that says to increase rates right now instead of waiting. That won't help his V shaped recovery. We're not even close the the end of the real estate collapse. Commercial will be next as Bernake says. More bank write downs since the troubled ones have already sold their good assets to show one-time profits for this quarter. Q3 & Q4 won't be pretty especially since unemployment #'s keep rising. Retail spending is a massive part of our ecomony and with no jobs there won't be any spending. A V shaped recover is an insane thought. If you like charts check out this link and its astonishing comparison to the Great Depression. Very scary! http://dshort.com/articles/2009/bear-cliff-diving.html Time to get the ball rolling with legalizing marijuana. What did they do in the Great Depression to get more funds to the Fed. They legalized alcohol.
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David O - Wednesday July 22, 2009 12:09PM EDT
Westbury is the same guy that said housing was contained back in 2008. Putz.
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elvenkind44 - Wednesday July 22, 2009 12:09PM EDT
If the Dow hits 10,000 by the end of the year, it will only be down 35%. Bring out the Champagne.
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Daniel - Wednesday July 22, 2009 12:12PM EDT
Dude is smoking crack.
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feffp - Wednesday July 22, 2009 12:12PM EDT
What a crock. He's ignoring all of the fundamentals of: the dollar weakening vs public and private debt vs deficits vs declining employment vs declining earnings vs "no more pools of wealth to tap for idiotic spending" in America.
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n_j_wolff - Wednesday July 22, 2009 12:13PM EDT
BUY BUY BUY!!!
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psiceobill - Wednesday July 22, 2009 12:15PM EDT
He should be Obama's PR man.
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Leo - Wednesday July 22, 2009 12:19PM EDT
Sorry to rain on your parade, Brian, but to base your assertions on the idea that interest rates will somehow stay at these level is assinine. The excess liquidity that Congress, the O-Team and Turbo-Timmy are pumping into circulation will take care of that. At this point, I'd place the "fair value" of Brian's IQ at about 29.
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n_j_wolff - Wednesday July 22, 2009 12:19PM EDT
If I recall higher highs on lower volume is a very big warning signal.
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redwoodkape - Wednesday July 22, 2009 12:21PM EDT
Let's consider the implications of what this guy is saying. If stocks are trading at a 50% discount to fair market value, then "fair value" is 17,800 for DJI and 1,900 for SPX. He is saying that the market should be at all time record highs in the middle of a recession. That would give a triple-digit P/E ratio if you use trailing 12 month reported earnings instead of projected guesstimates of operating earnings. Does that make any sense at all? Not!
Stocks Are Cheap! Bull Sees Dow 10,000 By Year-End
Posted Jul 22, 2009 12:00pm EDT by Peter Gorenstein in Investing Related: ^dji, ^GSPC, qqqq, kre, xlf, skf
Stocks are cheap -- very cheap, says Brian Wesbury, chief economist with First Trust Advisors. In fact, Wesbury says the market is trading at a 50% discount to fair market value, even after the significant rally off the March lows, which he claims was triggered by the easing of mark-to-market standards.
"Once they changed that rule all of a sudden the banks were able to raise capital [and] credit spreads started to come in. And that's where the rally has come from," he says.
But why does he think stocks are so undervalued?
As he writes in his latest Forbes commentary: "To determine fair value for the stock market we use historical norms for the relationship between stock prices, interest rates and corporate profits. These norms suggest that with interest rates at current levels and corporate profits where they were in the first quarter of 2009, stocks today are at no more than 50% of fair value. Yes, that's right, stocks would have to roughly double from here to get to fair value.
Despite this belief, he's not expecting to reach 'fair value' in the near future. The stock market, he says, "will remain undervalued at least for the next couple of years unless it has a monster rally."
In the meantime, which stocks are most undervalued?
Wesbury won't make specific stock picks but according to his firm's analysis, technology, and small and mid-cap regional banks offer the best value.
115 Comments
Showing comments 1 - 20 of 115Next
Devin J - Wednesday July 22, 2009 12:04PM EDTThis is the same guy that says to increase rates right now instead of waiting. That won't help his V shaped recovery. We're not even close the the end of the real estate collapse. Commercial will be next as Bernake says. More bank write downs since the troubled ones have already sold their good assets to show one-time profits for this quarter. Q3 & Q4 won't be pretty especially since unemployment #'s keep rising. Retail spending is a massive part of our ecomony and with no jobs there won't be any spending. A V shaped recover is an insane thought. If you like charts check out this link and its astonishing comparison to the Great Depression. Very scary! http://dshort.com/articles/2009/bear-cliff-diving.html Time to get the ball rolling with legalizing marijuana. What did they do in the Great Depression to get more funds to the Fed. They legalized alcohol.
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David O - Wednesday July 22, 2009 12:09PM EDTWestbury is the same guy that said housing was contained back in 2008. Putz.
report abuse
report abuse
elvenkind44 - Wednesday July 22, 2009 12:09PM EDTIf the Dow hits 10,000 by the end of the year, it will only be down 35%. Bring out the Champagne.
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Daniel - Wednesday July 22, 2009 12:12PM EDTDude is smoking crack.
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feffp - Wednesday July 22, 2009 12:12PM EDTWhat a crock. He's ignoring all of the fundamentals of: the dollar weakening vs public and private debt vs deficits vs declining employment vs declining earnings vs "no more pools of wealth to tap for idiotic spending" in America.
report abuse
n_j_wolff - Wednesday July 22, 2009 12:13PM EDTBUY BUY BUY!!!
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psiceobill - Wednesday July 22, 2009 12:15PM EDTHe should be Obama's PR man.
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Leo - Wednesday July 22, 2009 12:19PM EDTSorry to rain on your parade, Brian, but to base your assertions on the idea that interest rates will somehow stay at these level is assinine. The excess liquidity that Congress, the O-Team and Turbo-Timmy are pumping into circulation will take care of that. At this point, I'd place the "fair value" of Brian's IQ at about 29.
report abuse
n_j_wolff - Wednesday July 22, 2009 12:19PM EDTIf I recall higher highs on lower volume is a very big warning signal.
report abuse
report abuse
redwoodkape - Wednesday July 22, 2009 12:21PM EDTLet's consider the implications of what this guy is saying. If stocks are trading at a 50% discount to fair market value, then "fair value" is 17,800 for DJI and 1,900 for SPX. He is saying that the market should be at all time record highs in the middle of a recession. That would give a triple-digit P/E ratio if you use trailing 12 month reported earnings instead of projected guesstimates of operating earnings. Does that make any sense at all? Not!